In my previous article, we started the discussion on the areas within the manifesto that were achieved versus those that have not yet been implemented.

This week, we will dive into these achievements to highlight the areas that went well, the unexpected consequences and whether the outcome matched the initial expectations.

The government’s plans for growth, such as the retraining and retooling program intended to provide opportunities to retrenched workers to gain alternative employment or to be self-employed (the Re Re Program) in conjunction with the micro loans scheme for Barbadians to start their own businesses, should be encouraged. Once properly implemented, they should generate financial and social returns for the country.

One area that has had heavy discussion was the removal of NSRL. Many cheered with relief at its removal with the expectation that vendors would immediately pass on savings to consumers, in the same way that increases are usually passed on.

Unfortunately, this did not fully materialise. Worse yet, we have been recently informed that there will beincreases in food prices before year end due to a severe shortage in the United States of two critical ingredients for livestock feed and food extracts.

NSRL is a consumption tax, which is a tax on the goods that we purchase, rather than a tax on the income we earn. The introduction of a new consumption tax without a special deduction to reduce its impact on low-income households made this tax regressive, as low-income households consume a larger percentage of their income as compared to high-income households.

For example, let us compare two households and assume that both have the same typical expenses such as rent, groceries, utilities, and so on, totaling $900. If Household A makes $1,000, then 90% of income is spent on expenditures. For Household B earning $2,000, 45% of income is spent on expenditures. We can then see the impact of an increase in consumption tax for both households, even if their level of consumption remained the same. An increase in a consumption tax may result in both households paying the same amount of tax; however, it can be clearly seen that an additional $200, for example, would have a more detrimental impact on Household A than it would on Household B.

The recommendation has been to tighten our belts; however, empathy is required as many households have been engaging in belt tightening for the last ten years.

Given that many retailers seldom reduce their costs, even with a reduction in consumption taxes, ideally, a provision should be implemented to help those within a certain income bracket to cope with the tax increases, rather than the removal of the NSRL, as the impact of this tax has already taken place and would be difficult to reverse simply by removing the tax.

The recent change to the road tax is another example of the balance between the aforementioned inequities versus widened tax base, as the previous system could have been circumvented by vehicle owners who refused to remit their road tax payments.

However, under the new system, anyone that utilizes our roads must pay the tax as it is now associated with the fuel consumption, thereby, widening the tax base and theoretically, collecting more taxes in total with each individual tax payer remitting less taxes as there are now more persons to share the burden.

Again, to ensure that low-income households are not pushed further into poverty, provisions should be made to ensure that compensation genuinely assists the most vulnerable in society.

According to the Barbados Economic Society’s Response to the 2019-2020 Budgetary Proposal for Barbados dated March 22nd, 2019, those (taxpayers) earning less than $18,000 per year will be most affected by the change in bus fare and the VAT base broadening but have not received any additional protection. One potential solution is a review of the reverse tax credit and other income tax allowances, bearing in mind the requirements of the Barbados Economic Recovery and Transformation program.

The decisions to be made are not easy ones. The damage done to our economy is significant and will take many years to turn around. It is of utmost importance that the most vulnerable are protected. We should also ensure that those who have managed to avoid poverty do not also become a drain on society as a result of undue hardship that turned their achievements (such as land ownership and investments) into burdens or losses.

Legal

No unauthorized use is permitted of content produced by NationNews.com, The Nation Newspaper or any other publication or media owned by Nation Publishing Co. Limited. Unauthorized use includes framing and direct posting of content on websites other than www.nationnews.com.